• Equities are firmer in Europe and back to flat for US futures, as mixed APAC trade and PMI pressure eases a touch
• USD has regrouped from Friday's dovish-downside though GBP outperforms while JPY has eased from best following pronounced APAC action
• Bonds back off after early EU buying frenzy; with Gilts leading the way as the prospect of Sunak becoming the UK PM increases significantly
• Commodities clipped, but off worst, as the USD regains poise and recessionary concerns mount alongside further China COVID crackdowns
• EZ/UK PMIs were predominantly below expectation and flagged renewed recession concerns
• Looking ahead, highlights include US Flash PMI and the UK Conservative Party leadership election

As of 11:10BST/06:10ET

LOOKING AHEAD

• US Flash PMIs, UK Conservative Party Leadership Election
• Click here for the Week Ahead preview.

EUROPEAN TRADE

EQUITIES

• European bourses are mixed, though are well off lows, as initial strength faded following the open amid renewed USD strength and as PMIs flash ongoing recessionary/inflationary concerns.
• Sectors are a touch mixed amid the above action, Energy remains the standout laggard amid the complex's broader price action.
• US futures have managed to make their way back to being essentially unchanged on the session, as the initial bout of underperformance eases as US participants enter the fray pre-PMIs.
• Click here for more detail.

FX

• Dollar regroups after Friday's reversal on less hawkish Fed dynamic and reports of Japanese intervention, DXY above 112.500 at best vs 111.760 low.
• Sterling underpinned ahead of deadline in race to be next UK PM with Sunak hot favourite to succeed, Cable holding within 1.1400-1.1300 range.
• Yen reverses from peaks as official buying momentum wanes, USD/JPY up to 149.70 from sub-145.50 at one stage.
• Aussie underperforms ahead of Budget that is expected to see growth forecast downgraded, AUD/USD under 0.6300 and Kiwi down in sympathy on NZ Labour Day as NZD/USD declines through 0.5700.
• Offshore Yuan below 7.3000 vs Buck as China tightens COVID restrictions in key southern manufacturing hub.
• Euro fades from a fraction below 0.9900 towards 0.9800 after broadly weak PMIs and amidst heavy option expiry interest.
• PBoC set USD/CNY mid-point at 7.1230 vs exp. 7.1173 (prev. 7.1186); weakest fix since June 1st 2020.
• Click here for more detail.

Notable FX Expiries, NY Cut:

• EUR/USD: 0.9550 (1.3BN), 0.9600 (1.1BN), 0.9740-50 (1.6BN), 0.9800 (1.5BN), 0.9815-20 (993M), 0.9840-50 (2.0BN), 0.9875 (1.3BN), 0.9900-05 (771M)
• USD/JPY: 147.35-45 (745M), 150.00 (2.0BN)
• Click here for more detail.

FIXED INCOME

• Bonds back off after early EU buying frenzy; with Gilts leading the way as the prospect of Sunak becoming the UK PM increases significantly.
• Bunds reverse ahead of technical resistance around 136.78 to 135.23, Gilts not far from 100.00 to 98.15 and T-note from 110-15 to 109-25 amidst block sales in 5 and 10 year futures.
• Click here for more detail.

COMMODITIES

• Commodities clipped as the USD regains poise and recessionary concerns mount; crude benchmarks are hampered on such factors, though similarly to US equity futures have recently eased off lows.
• Specifically, WTI and Brent benchmarks post downside of circa. USD 1.00/bbl compared to losses just shy of USD 2.00/bbl at worst.
• Both precious and base metals are broadly speaking under pressure; currently, Gold is impaired by circa. USD 10/oz and has been pushed back below the 10-DMA at USD 1650/oz.
• QatarEnergy head said the Co. is open to discussing working with Shell (SHEL LN) in all energy sectors, via Reuters.
• China sold 100% of wheat offered at auction of state reserves on Oct 19th, according to Reuters citing the traded centre; sold at an average price of CNY 2,829/t.
• Click here for more detail.

NOTABLE EUROPEAN HEADLINES

• UK's Boris Johnson has pulled out of the Conservative Party leadership contest, according to The Times' Swinford. UK's Boris Johnson and Rishi Sunak failed to strike a deal in talks on Saturday, according to the Times.
• UK leadership candidate Rishi Sunak so far received support from 147 MPs vs 24 for Penny Mordaunt. The deadline to reach the 100 threshold is at 14:00BST/09:00EDT on Monday.
• UK leadership candidate Penny Mordaunt will stay in the race as she reportedly sees a route to 100 nominations now Boris Johnson is out, according to sources cited by Bloomberg's Wickham.
• UK Chancellor Hunt backs Rishi Sunak for PM, via The Telegraph.
• UK Chancellor Hunt is said to be mulling up to GBP 20bln of tax rises in the October 31st budget, according to The Telegraph. The October 31st fiscal statement could be delayed after PM Truss' resignation, according to the FT.
• UK Chancellor Hunt is expected to extend the current freeze in income tax and allowances into the next parliament, according to FT citing sources.
• BoE's Mann said bond purchases for financial stability were targeted and temporary, and the start of bond selling on Nov 1st shows the BoE does not feel like its hands are tied. Mann said it is the BoE's job to address financial stability risks.
• Moody's affirmed UK's rating at Aa3; revised outlook to "Negative" from "Stable.
• S&P affirms Greece at BB+/B; outlook stable.

NOTABLE EUROPEAN DATA

• EU S&P Global Composite Flash PMI (Oct) 47.1 vs. Exp. 47.5 (Prev. 48.1); Manufacturing Flash PMI (Oct) 46.6 vs. Exp. 47.8 (Prev. 48.4); Services Flash PMI (Oct) 48.2 vs. Exp. 48.2 (Prev. 48.8)
• UK Flash Composite PMI (Oct) 47.2 vs. Exp. 48.2 (Prev. 49.1); Services PMI (Oct) 47.5 vs. Exp. 49.0 (Prev. 50.0); Manufacturing PMI (Oct) 45.8 vs. Exp. 48.0 (Prev. 48.4)

NOTABLE US HEADLINES

• Fed's Evans (departing) said we will need to raise rates further and hold stance there for a while, exact stance of policy will depend on the outlook and risks, via Reuters.
• White House Economy Advisor Deese said the US is strong enough to avoid recession.
• Elon Musk’s Twitter (TWTR) takeover debt to be held by banks due to turbulent markets; banks may sell some of the USD 13bln of Twitter debt around year-end, according to WSJ sources. Elon Musk-Twitter (TWTR) deal ‘still on track’ despite national security report, according to NY post citing sources.
• Tesla (TSLA) cut Model 3 and Model Y prices in China; Model 3 cut from CNY 279.9k to CNY 265.9k, Model Y cut from CNY 316.9k to CNY 288.9k, via Reuters.
• US President Biden does not support a permanent repeal of the debt limit, via Reuters.

CRYPTO

• Bitcoin is firmer on the session but has slipped towards the lower-end of a USD 400 range, which in itself is holding a similar magnitude above the USD 19k mark.

GEOPOLITICS

RUSSIA-UKRAINE

• Russian Defence Minister held phone calls with the US Pentagon Chief, UK Defence Minister, and the French Armed Forces Minister, according to Interfax and Reuters.
• French Armed Forces Minister has confirmed Russian Defence Minister told him Russia fears that Ukraine may use a "dirty bomb" on Russian territory. Russia's Shoigu warns of 'uncontrolled escalation' in Ukraine conflict, via Reuters.
• Ukraine's Foreign Minister spoke with US Defence Secretary Blinken and said they both agreed the Russian rhetoric on "dirty bombs" is aimed at creating a pretext for a false flag operation. They also discussed further practical steps to boost Ukraine’s air defense.
• Russian forces continued to target Ukraine's energy and military infrastructure over the weekend, according to the Russia Defence Ministry cited by Interfax.
• Russian authorities said two pilots died in a military plane crash into a residential building in Irkutsk, Russia, according to Interfax.
• Russian Deputy Foreign Minister said Russia completely reject any demilitarized zones in the vicinity of the Zaporozhye station, Via Al Jazeera.
• Russia continues to use Iranian uncrewed aerial vehicles (UAVs) against targets throughout Ukraine, according to the UK Ministry of Defence.

OTHER

• South Korea fired warning shots after North Korean boat crossed the maritime border, according to South Korean Military. North Korea said it fired multiple rocket launchers in response to the warning shot from South Korea, according to KCNA. South Korean military has strengthened its readiness posture in case of contingency while tracking and monitoring related movements of the North Korean military in close cooperation between the ROK and the US, according to Yonhap.
• Iran's atomic energy organization said e-mail servers were hacked, according to state media.
• Nasdaq has quietly halted listings of small-cap Chinese companies as approvals were being subjected to additional reviews, according to WSJ.
• USTR Tai will speak on US-China relations at an event on Wednesday.

APAC TRADE

EQUITIES

• APAC stocks traded mixed after the initial optimism from Wall Street on Friday began to fade.
• ASX 200 was boosted by its commodities sector as the rise in underlying metals supported mining names in the region.
• Nikkei 225 was also firmer but lagged behind peers (ex-China) following the touted FX intervention on Friday and again on Monday.
• KOSPI was led by gains in its IT names, but the region felt some jitters following an exchange of fire between North and South Korea after a North Korean boat crossed the South Korean maritime border.
• Shanghai Comp. initially traded flat after Chinese President Xi secured an unprecedented third term as the party leader, as expected. Chinese President Xi also suggested China's economy has high resilience and sufficient potential. The index also saw some brief upside after China released a myriad of delayed economic data, with Q3 GDP Y/Y topping forecasts and Trade Balance printing a larger surplus than expected, whilst exports also increased more than forecast, although these gains pared back.
• Hang Seng buckled as Xi’s leadership overhaul could prove to result in prolonged oversight and less autonomy for Hong Kong, with the Hang Seng Tech Index slumping over 5% and Alibaba, Tencent, JD.com, Baidu and Meituan shedding as much as 7-10%.

NOTABLE APAC HEADLINES

• China suspended in-person schooling and dining-in at restaurants in a district in Guangzhou, "stoking concerns about the potential for disruption in the southern Chinese manufacturing hub that’s home to about 19mln people", Bloomberg reported.
• PBoC injected CNY 10bln via 7-day reverse repos at a maintained rate 2.00% for a daily injection of CNY 8bln.
• Japan's Top Currency Diplomat Kanda will not comment on whether they intervened in FX markets and said there is no change in stance that "we are ready to take action 24/7" and will continue to take appropriate action, via Reuters. Japan's Top Currency Diplomat Kanda offered no comments on intervention on Monday morning.
• Japanese Finance Minister Suzuki said no comment on FX intervention; currently trying to confront speculators; monitoring FX with a high sense of urgency.
• USD/JPY drop on Monday likely due to intervention, according to market participants cited by Reuters.
• Japanese government urges the BoJ to remain vigilant to the impact of sharp market moves, according to a draft document cited by Reuters.
• The Japanese government and the BoJ decided to intervene in FX on Friday by buying the Yen and selling the Dollar, according to Nikkei sources citing sources.
• Japan's FX intervention on October 21st is estimated at JPY 5.4-5.5tln, according to market sources and calculations cited by Reuters.
• BoJ Governor Kuroda said CPI growth beyond next FY likely to fall below 2%, will continue to put all effort into achieving price target along with rise in wages.
• Japanese gov't expects the BoJ to watch the impact of market moves, via Bloomberg citing a document; to collaborate closely with the BoJ on the policy mix; Finance Minister will not comment on FX intervention.
• Japan is to ease rules in relation to brokerages offering investment advice, according to reports citing Nikkei.
• Japanese Economy Minister Yamagiwa is planning to step down, according to NHK.
• South Korea is to expand its corporate-bond buying program, according to the finance minister cited by Reuters.
• RBA's Kent reiterated the Board expects to increase interest rates further in the period ahead; size and timing of rate increases in Australia will depend on incoming data.

CCP NATIONAL CONGRESS

• Chinese President Xi secured an unprecedented third term as Chinese Communist Party (CCP) leader, as expected.
• The CCP amended its constitution to include "two establishes" and "two safeguards" to "cement" Xi Jinping's status as the core of the party, according to Reuters.
• Chinese President Xi is to head the communist party's central commission for discipline inspection, according to state media.
• The new CCP Politburo Standing Committee includes Li Qang, Li Xi, Ding Xuexiang, Cai Qi, Zhao Leji, Wang Huning, according to state media. The new Central Committee (comprising of 171 alternate members) does not include Liu He, Han Zheng, Sun Chunlan, Yi Gang, Guo Shuoing,
• Chinese President Xi said China's economy has high resilience, sufficient potential and has room for manoeuvre. Xi said China will open its doors even wider. Xi said China must ensure the CCP continues to be the backbone people can lean on, according to state media.

DATA RECAP

• Chinese GDP (Q3) Y/Y 3.9% (Exp. 3.3%, Prev. 0.4%); Q/Q 3.9% (Exp. 3.5%, Prev. -2.6%)
• Chinese Trade Balance (Sep) (USD) Y/Y 84.7bln (Exp. 80.3bln, Prev. 79.39B); Exports +5.7% (Exp. +4.0%, Prev. 7.1%), Imports +0.3% (Exp. 1.0%, Prev. 0.3%)
• Chinese Retail Sales (Sep) Y/Y 2.5% (Exp. 3.0%, Prev. 5.4%); YTD Y/Y 0.7% (Exp. 0.9%, Prev. 0.5%)
• Chinese Industrial Output (Sep) Y/Y 6.3% (Exp. 4.8%, Prev. 4.2%); YTD Y/Y 3.9% (Exp. 3.7%, Prev. 3.6%)
• Chinese Fixed Investments (Jan-Sep) 5.9% (Exp. 6.0%)
• Australian Composite PMI (Oct) 49.6 (Prev. 50.9); Services PMI (Oct) 49.0 (Prev. 50.6); Manufacturing PMI (Oct) 52.8 (Prev. 53.5)
• Japanese Jibun Manufacturing PMI (Oct) 50.7 (Prev. 50.8); Services PMI (Oct) 53.0 (Prev. 52.2); Composite PMI (Oct) 51.7 (Prev. 51.0)